6/11/19 Terwilliger v. Beazer East, Inc., et al.
Court of Appeals
Court of Appeals addresses burning question: Is a coke oven a product or a structure?
Article also featured in Claims Journal online
Summarized by V. Christopher Potenza, Esq.
In a lengthy twelve-page decision that touches on nearly every aspect of product liability, the Court of Appeals addressed whether the defendant met its burden on summary judgment that the large, industrial coke ovens located in decedent’s workplace are not “products” for purposes of strict products liability, such that defendant did not owe a duty to warn of their harmful nature.
The decedent plaintiff alleged he was caused to suffer lung cancer due to asbestos exposure arising from work around the coke ovens at the former Bethlehem Steel site between 1966 and 1983. A “coke oven,” roughly 13 feet high and 1.5 feet wide, burns coal at high temperatures to create coke, a fuel then used in the production of steel. A “coke oven battery” is a collection of these individual ovens stacked in a long row to create the wall of the battery structure in which the ovens are housed. The batteries at issue here were located on the grounds of the coke oven plant, which “consisted of a number of other structures, including coal towers, coal conveyors, coke wharfs, screening stations, storage tanks, electrical substations, gas recovery systems, byproduct facilities, and quenching stations.”
The appeal pertained only to plaintiff’s second and fourth causes of action, which allege under a products liability theory that defendant Honeywell, as successor-interest to Wilputte, at all times relevant “engaged in the design, construction, maintenance, and repair of coke ovens and coke oven batteries, as well as in the sale of goods and contracting services for the construction of coke ovens” at the Lackawanna plant and “failed to disclose to plaintiff’s decedent and those similarly situated or warn them of the known dangers associated with the inhalation of coke emissions.”
Defendant moved for summary judgment, arguing that the coke ovens at issue are not products and hence, do not subject it to strict liability as a products manufacturer, and that it’s contract with Bethlehem Steel, under which it designed and built the ovens, was one for services, and that, as a service provider it is not subject to strict products liability.
The Court of Appeals reversed the order of the Appellate Division, Fourth Department, finding that the defendant failed to meet its burden on motion that the coke ovens were not a “product.” The Court noted that none of the prior strict products liability case law provides a clear definition of a “product,” however, it is for the court to determine as a matter of law whether something is, or is not, a product. Intertwined with the analysis of whether something is a product is the more central question of whether the defendant manufacturer owes a duty to warn.
Thus, the Court evaluated whether the coke ovens are products within the broader context of the common-law principles of assigning a legal duty to warn. The court’s overarching concern in assigning a duty to warn is to settle upon the most reasonable allocation of risks, burdens and costs among the parties and within society, accounting for the economic impact of a duty, pertinent scientific information, the relationship between the parties, the identity of the person or entity best positioned to avoid the harm in question, the public policy served by the presence or absence of a duty and the logical basis of a duty. To that end, although the criteria for determining whether a duty should attach to a seller may be tied to the nature of the given transaction, the case law emphasizes governing factors such as a defendant’s control over the design of the product, its standardization, and its superior ability to know—and warn about—the dangers inherent in the product’s reasonably foreseeable uses or misuses.
Based on the record before it, the Court of Appeals found that the defendant had not met its burden in showing that the coke ovens at issue are not products as a matter of law. Regardless of the alterations Bethlehem may have made to the scale and specifications of the battery at large, the ovens themselves served one function: the production of coke. This process was standard across all variations of coke ovens that Wilputte sold, ultimately placing the hazardous thing at issue squarely within the category of products to which liability has attached in the failure-to-warn context. Furthermore, the record established that Wilputte was an expert designer and manufacturer in the market and sale of these coke ovens such that a duty to warn was owed. It was undisputed that Wilputte exerted full control over the manner in which the coke ovens were built. Wilputte was responsible for furnishing most if not all necessary materials in the production of the ovens, including the various parts and components of the operative machines specific to Wilputte’s proprietary design schematics. Although Bethlehem made specific requests to suit the Lackawanna plant’s needs, the coke oven designs—as evidenced in Wilputte’s advertising brochures and technical drawings—were complex and unique to Wilputte’s enterprise, and Wilputte was responsible for installing the ovens pursuant to those designs. Nothing in the record implies that Bethlehem could have created these ovens without Wilputte’s standard design and control over its product, nor could Bethlehem have altered the ovens’ hazardous nature.
The record also established that Wilputte was responsible for placing the ovens into the stream of commerce and that it derived financial benefit from its role in the production process. Indeed, by the time decedent began working for Bethlehem, Wilputte had sold hundreds of coke ovens to plants both in the United States and in Canada and Mexico. Wilputte also marketed its ovens with informational brochures showing the completed ovens and their functionality, indicating that Wilputte, not Bethlehem, was the commercial source of the product. Although the ovens were largely assembled and completed on-site, that merely speaks to the logistical realties of the market of which Wilputte had a considerable share.
Lastly, the record supported the conclusion that Wilputte was in the best position to assess the safety of the coke ovens because of its superior knowledge regarding the ovens’ intended functionality. The brochures, technical designs, and defendant’s established market share clearly demonstrate that Wilputte could fairly be said to know and to understand when an article is suitably designed and safely made for its intended purpose, giving it the opportunity and incentive to make the ovens safe for its users at the time they were sold and built. There is no evidence in the record to suggest that decedent or Bethlehem was better-positioned to understand the dangers inherent to the coke ovens or decedent’s role as a lid man at the Lackawanna plant.
The Court expressly dismissed the defendant’s contention that because these ovens were built into the large structures that make up the oven battery, they are fixtures on real property and cannot be products as a matter of law. While these structures may be considered real property for tax purposes, other affixed taxable real property under the Real Property Tax Law, such as elevators and large turbines, have nevertheless been subject to strict products liability claims. Defendant’s emphasis on the ovens’ size and immobility is irrelevant to the question of whether they are products for purposes of establishing a duty to warn.
The Court also similarly rejected defendant’s arguments that the contract between Bethlehem and Wilputte is a service contract which precludes liability in this case. Where a good is sold in the course of a transaction, the mere presence of a service component in that transaction does not mean that the furnished item is not a product to which a duty to warn may apply construction services. It is of no moment that the coke ovens at issue took many hours to build, or that the work required to complete the transaction between Bethlehem and Wilputte resembled tasks typically fulfilled by a general contractor. The apportionment of time between sale and service is not the test upon which defendant’s duty relies. Such a test ignores the inescapable fact that Wilputte crafted, marketed, and sold the coke ovens that allegedly caused the harm underlying plaintiff’s strict product liability claim.
This case provides an excellent blue print on how the courts are to address whether an alleged product is indeed a “product” for duty and liability purposes, but cautioned that each claim must be judged on its own facts and circumstances. Interestingly, the Court of Appeals explicitly addressed the dissent’s concern that this decision would extend strict liability to general contractors who may be involved in the construction of buildings where defective products are housed. The Court reasoned that it was merely adhering to the tradition of evaluating such claims on a case-by-case basis and concluded that defendant has failed to meet its burden of establishing on this record that the article at issue is not a product.